Emerging Markets
Emerging markets encompass regions with significantly diverging fundamentals and a broad range of credit challenges—from persistent inflation and tightening financing conditions to sluggish domestic demand and geopolitical tensions.
How We Rate Emerging and Frontier Markets
Emerging and frontier markets are strategically positioned to drive global economic growth through the expansion of their domestic markets.
Emerging and frontier markets will play a crucial role in shaping the global economy and driving growth, contributing approximately 65% of global economic growth by 2035. Frontier markets will play a prominent role in this growth due to their favorable demographics—but face significant challenges from persistently high inflation and political uncertainty.
Monthly Highlights
Global Shocks Continue To Test Resilience
Rising U.S. term premia and expected Fed tightening are pushing up long-term U.S. yields, potentially increasing emerging market (EM) borrowing costs. Economies with above-target inflation could also face additional pressure to raise domestic policy rates.
Saudi oil exports are facing further disruptions, as shipments through the Bab el-Mandeb Strait have dropped amid Houthi attack concerns, on top of blockages to the Strait of Hormuz. Over 60% of Saudi exports are headed to East Asia and South/East Africa.
El Niño's economic effects will vary across EMs, reflecting differences in weather-sensitive sectors' exposure and preparedness. Extreme weather could disrupt output, food supplies, and electricity generation, intensifying inflationary and broader macroeconomic pressures.
Markets shrugged off the July escalation in the Middle East war, though the calm is uneven. EM yields rose only modestly (median 17 basis points [bps], speculative grade [30 bps], and for Türkiye [165 bps]), spreads held near historic tights, and issuance outside China fell (year-on-year) about 41% to $17 billion.
Credit quality is broadly stable but deteriorating in pockets. Negative rating actions lead positive ones year to date (60 versus 51) mostly in Mexico and Brazil, with Latin America (LatAm) in the lead among EM regions with a 16% negative bias.
Latin America
June 08, 2026
This Time Could Be Different for Argentina
On June 10, 2026, S&P Global Ratings raised its local and foreign currency sovereign issuer credit ratings on Argentina to 'B-/B' from 'CCC+/C', reflecting diminishing economic vulnerabilities.
Argentina’s poor economic legacy for more than three decades gives cause for skepticism about the success of its current economic adjustment program, but there are grounds for cautious optimism about its long-term success.
The country remains vulnerable to adverse external shocks (such as higher global inflation and interest rates) and domestic shocks (such as shifts in economic and political expectations of residents) that could lead to capital outflows, undermining the currency. A successful stabilization program depends upon maintaining economic growth while bringing down inflation and accumulating more foreign exchange reserves.
EM EMEA
Maritime chokepoints around the Middle East
June 25, 2026
Credit Conditions Europe Q3 2026: Resilient Through Stormy Waters
Overall: Europe’s credit conditions remain resilient, helped by adaptable businesses and constructive financing markets, but the macro outlook is lackluster. Growth is likely to stagnate in the second half of 2026, while energy-driven inflation continues to weigh on central banks and borrowers.
Risks: Downside risks are evolving rather than disappearing. Key pressure points include potential for renewed Middle East energy disruption, rising EU-China trade frictions in strategic sectors, spillovers from higher long-term yields, and AI-enabled cyber threats that could test operational resilience across sectors.
Ratings: Rating actions broadly remain aligned with underlying credit fundamentals. Banks, insurers, and structured finance show resilience, while pressure is more concentrated among lower-rated borrowers and weaker sectors, including autos and chemicals, and issuers facing refinancing needs.
EM Asia-Pacific
Credit Conditions
June 25, 2026
Credit Conditions Asia-Pacific Q3 2026: Hormuz Reopens, Fragility Remains
The reopening of the Strait of Hormuz would lower tail risk, but supply normalization will be uneven and costly. Second-order shocks could cause more credit pains.
Tighter monetary policy to stem inflation could come amid capital outflows, potentially at the expense of growth. Additional policy support may narrow fiscal space.
AI-demand is cushioning Asia-Pacific's growth from a supply shock, but overlapping strains will widen the credit gap. Prioritization of supply security over cost could drive a structural rewiring of trade flows.
Frontier Markets
Emerging Markets
July 29, 2026
African Markets Quarterly Highlights: Resilient Ratings, Rising Risks
Triple threat to Africa (inflation, growth, and financing) remains in place: Rising diesel, gasoline, and shipping fuel costs are weakening fuel demand across most markets, while inflation in countries such as Ghana and Mozambique is approaching growth-sensitive levels. A strong El Niño climate pattern could further amplify food-price pressures.
The energy price shock is widening policy and credit divergence across Africa. Southern Africa has absorbed some of the region's largest fuel-price increases, while subsidy regimes in the Economic and Monetary Community of Central Africa (CEMAC) and Angola have limited the household impact at the expense of higher fiscal burdens.
External liquidity risks vary widely across Africa, reflecting differences in both financing needs and reserve buffers. While reserve pooling supports resilience in WAEMU and CEMAC, CEMAC remains more exposed to external shocks due to its heavier reliance on hydrocarbon exports.
External financing conditions have stayed mostly supportive. African sovereign U.S. dollar yields edged up only modestly to around 8.0% from mid-June lows despite broader inflation pressures. Yet growing divergence in localcurrency yields, led by Egypt (+258 basis points [bps]), Nigeria (+190 bps), and Ghana (+93 bps), points to increasingly differentiated domestic funding conditions.
Sovereign ratings remain resilient, with African reforms and steady financing conditions sustaining positive momentum despite the Middle East war, illustrated by our recent upgrade of Nigeria to ‘B’ on the back of its improving macroeconomic profile.